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Mike Ashley’s Sports Direct bets on Tesco recovery Mike Ashley’s Sports Direct bets £43m on Tesco recovery
(about 3 hours later)
Mike Ashley’s Sports Direct has taken a bet that Tesco’s shares will improve as the embattled supermarket giant faces the worst crisis in its 95-year history.Mike Ashley’s Sports Direct has taken a bet that Tesco’s shares will improve as the embattled supermarket giant faces the worst crisis in its 95-year history.
The sportswear retailer has entered into a put option for 23 million of Tesco’s shares with Goldman Sachs – which is equivalent to a 0.28 per cent stake in Tesco. His Sports Direct empire has agreed a complicated “put” option with Goldman Sachs banking on a recovery in Tesco’s shares, which have dived nearly 16 per cent this week on the revelation of a £250 million hole in its accounts.
The option is worth up to £43 million and comes at heightened point for Tesco, which this week revealed a £250 million hole in its profit forecasts and that it has been without a full-time finance chief for five months. The agreement — similar to another bet Ashley made on Debenhams’ shares this year — will leave Sports Direct with a maximum exposure of £43 million, the company said.
Adrian Bailey, the chairman of the Parliamentary Business Committee today told the BBC, Tesco’s accounting error was “unbelievable”. Experts were left guessing as to the billionaire’s motivations, which could see Sports Direct pocket a profit if shares were to rise. However, they today edged down 1.5p to 193.42p.
Sports Direct’s investment could be seen as backing for new chief executive Dave Lewis. The two retailers have reportedly been working together to install Sports Direct stock and concessions in Tesco shops. The retailer said only that the deal “reflects Sports Direct’s growing relationship with Tesco and belief in Tesco’s long-term future”.
Sports Direct said today: “This investment reflects Sports Direct's growing relationship with Tesco and belief in Tesco's long-term future.” Sports Direct’s only relationship with Tesco is outside the UK in some of its central European and South-east Asian markets, where the supermarket has leased some sites to the sporting goods chain. It has been suggested that Ashley could use the deal to get inside other stores due to be shut by Tesco to expand his overseas business.
The move to buy up Tesco shares echoes a similar situation earlier this year when Newcastle United owner Ashley took a 4.6 per cent stake in Debenhams before promptly selling it. A similar put option was made with Goldman Sachs in January over Debenhams’ share price recovering and was used by Ashley to sell more goods through its department stores.
News of the deal came amid growing concerns over Tesco’s admission that ex-finance officer Laurie McIlwee has not been in charge of its finances for five months despite the fact he was not officially set to leave the company until next month.
Meanwhile, it has emerged that MPs are considering whether to launch a new investigation into claims of the aggressive behaviour of supermarkets towards their suppliers in the wake of the Tesco scandal.
The powerful House of Commons Business Select Committee is mulling over whether to haul in supermarket bosses about the demands for bonuses and discounts they make of the companies whose goods they sell. Tesco’s over-estimation of its half-year profits forecast by £250 million is thought to be because of the way it accounted for such extra revenues from suppliers.
The business select committee chairman Adrian Bailey MP told The Independent he was watching the Tesco situation “very closely”, adding that he was “flabbergasted” at the supermarket’s mess.